the trial balance of a Sporting House shows a $150,000 outstanding balance in A/R at the end of 2005. During 2006, 80% of the total credit sales of $3,500,000 was collected, and no receivables were written off as uncollectible. The company estimated that 2.0% of the credit sales would be uncollectible. During 2007, the account of Sybrowsky, who owed $4,200 was judged to be uncollectible and was written off. At the end of 2007, the amount previously written off was collected in full from mr. Sybrowsky.

Question

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PREPARE THE NECESSARY JOURNAL ENTRIES FOR RECORDING ALL THE PRECEEDING TRANSACTIONS RELATING TO UNCOLLECTIBLES ON THE BOOKS OF Sporting House.

$150,000 outstanding balance in A/R at the end of 2005
Beginning balance of A/R for 2006

During 2006, 80% of the total credit sales of $3,500,000 was collected
Therefore 20% of $3,500,000 was not collected

...estimated that 2.0% of the credit sales would be uncollectible
So 2% of $3,500,000 is estimated bad debt. I think the account name is allowance for bad debt or estimated bad debt, check your text to sure.

During 2007, the account of Sybrowsky, who owed $4,200 was judged to be uncollectible and was written off. At the end of 2007, the amount previously written off was collected in full from mr. Sybrowsky.
So a reversing entry of $4,200 need to be made. Dr to cash and Cr to bad debt, or make an entry to his A/R account and show it paid. There are a coupe ways to do this one.

Things to keep in mind: there are a couple ways to account for bad debt. This company, like most retail co's, estimates it's bad debt in advance. Other co's typically write off debt as it occurs; this can involve carrying a lot more accounts on the books.